Competing With Banks Is Not Just About Pricing
Credit unions have faced tough times over the last few years, and they’re only going to get tougher. Though the economy may improve, credit unions will not get the bounce they expect if they aren’t forward thinking about their business. The banking business is overcrowded and fiercely competitive. Competing on price is a fool’s errand as anyone can do whatever it is you’re offering cheaper and probably faster. Training for bigger smiles to greet members will only lead to frowns for the C-suite.
Of course, pricing is a key element of a credit union’s success, but that doesn’t mean a credit union has to be the cheapest. Despite the not-for-profit label, credit unions, just like their members, cannot survive very long paycheck-to-paycheck.
Fees would be the easy way to make more money short term, but, given recent regulatory history regarding overdraft and debit interchange income, this isn’t a long-term strategy. Looking at NCUA data as synthesized by Tony Ward-Smith, it’s also not necessary. Every year, Ward-Smith deems credit unions as high performing if they have greater than 2.5 services per member; an average account balance higher than the national average for all CUs, $4,904 for 2010; and positive net earnings. Elevations Credit Union was one of the just 468 credit unions–out of 7,491 credit unions, that figured troubled me–that met all that criteria for 2010 and its fees per member tallied just $46, well below most of its peers.
Another troubling point revealed in the numbers is that credit unions overall have barely moved the needle on accounts per member; it hit 2.35 as of yearend, up from 2.22 in 2002, which was as far back as Ward-Smith’s data presented. His 468 high-performing credit unions hit 2.76 accounts per member, while the other reached just 1.89 accounts per member.
This is where employee investment plays a role. Who are the lowest-paid, likely least-trained employees at your credit union? The tellers and member service representatives. Yet who are the employees to make the all-important and lasting impression on your members? The tellers and member service representatives.
How about a couple of executives foregoing a round of golf or two at the next credit union conference in order to invest in the most important employees at your credit union? Service is not only about a warm greeting for members, though that’s certainly part of it. But when a member comes in to open an account, which should automatically come with an instantly issued debit card, they should also be made aware of your credit card offerings (also instantly issued). If you’re concerned about competing with the big guns on cards, consider merchant-funded rewards so that cost doesn’t bite into your bottom line at the same time as debit interchange restrictions. High-performing credit unions had 19.2% of their members with their credit cards in hand versus 6.7% of the other credit unions.
Something as simple as actually listening to a member’s response to the ubiquitous “How’s your day?” is crucial. A member might unload with, “My car broke down and I can’t afford a new one with my kid heading off to college.” A red flag should immediately go up with the teller: “We have great used car rates and while you’re at it, we also have college savings and loan programs.”
Cross-selling is service and an integral part to an overall performance strategy. If your minimum-wage teller isn’t listening because she wants to get back to texting her friends behind the counter, that opportunity is lost. Invest in these folks with pay and training. According to Ward-Smith, these high-performing credit unions (a factor in which is number of accounts per member) have 45 times the net earnings per member of the others.
Our May 18 issue will feature opposing viewpoints on whether or not to branch. Field of membership definitely plays a factor as will resources. Another key piece is how the branch is viewed. Building or buying yet another that appears to be a throwback from the Leave-It-To-Beaver era is worth about as much as it was at that time.
Most members don’t even realize credit unions offer investment services. Even the high-performing credit unions only have 9.6% of members participating in MMAs and 8.0% in IRAs, Ward-Smith reported. If a credit union decides to branch, arrange it so members know your IRA and MMA yields because they’re posted right when you walk in. Also, take advantage of technology from cash counters to remote tellers that create a more efficient shop.
If you’re ditching brick and mortar for virtual banking, make certain your IT infrastructure is in place to handle the load. An unreliable website is worse than a teller popping his gum with iPod ear buds glued in his ears.